BOJ Holds Policy Stable, Sends Optimistic Signs
- Author: Ronnie Bowen Apr 28, 2017,
Apr 28, 2017, 1:03
Trump's plan has been billed as the biggest tax cut in history, but the one-page proposal has thus far failed to offer details on how he will cut deficit, which analysts think can be a hard goal. Policymakers now expect real gross domestic product (GDP) to expand 1.6% in the fiscal year that began in April, higher than the 1.5% predicted in January.
Kuroda's comments come as the U.S. central bank raises interest rates while speculation swirls that the European Central Bank is considering backing off its own stimulus by turning off the taps on massive bond-buying or raising borrowing costs from historic lows. "It's also hard to justify talking about an exit when inflation is nowhere near even 1 percent", she said.
The decision followed a campaign by officials to highlight weakness in inflation, as opposed to firmness in the economy, to help tamp down speculation that the central bank may raise interest rates this year.
But the central bank statement warned of risks to that scenario from global trends, including US policies.
In its outlook report, the BOJ cited "geopolitical risks" as one of the downside risks to the economy, along with political confusion in Europe following Britain's vote a year ago to leave the European Union. However, it maintained it aims to achieve its price target by next year.
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The BOJ stuck to its forecast that it will achieve its 2% inflation target "around fiscal 2018". The latest set of February inflation figures from Japan have exhibited little signs of taking off. Headline CPI growth regressed to 0.3% year-on-year (YoY) while core CPI, or CPI excluding fresh food, made only slight headway in positive territory to 0.2% YoY.
The Japanese government bonds traded flat after the Bank of Japan (BoJ) left its benchmark policy rate unchanged at its monetary policy meeting held earlier today. They are the median estimates of the nine board members.
This month, the International Monetary Fund (IMF) raised its growth forecast for Japan's economy this year and next, citing a pickup in exports, but it warned that a shrinking labour force and below-forecast inflation would curb longer-term expansion. However, the bank's statement also said that risks to both prices and economic activity were "skewed to the downside" and that momentum toward the 2 percent inflation target isn't sufficiently firm yet.
Many analysts remain doubtful inflation will accelerate as quickly as the BOJ projects, with slow wage growth keeping households from boosting spending.